Please Note: This Article is 6 years old. This increases the likelihood that some or all of it's content is now outdated.

Retailer, Game’s appeal over unpaid rent during administration has been rejected.

Game landlords, Land Securities, Hammerson, Intu and British Land went to the Court of Appeal in February claiming that they had missed out on unpaid rent when Game collapsed in March 2012.

Administrators were appointed at Game after it filed notice after the March 2012 quarter day, which effectively gave them a three-month rent free period.

The landlords subsequently took the retailer to court to reclaim missing rent payments in February, and the Court of Appeal ruled in the landlords’ favour, which meant Game would have to pay £3m in unpaid rent.

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The games specialist retailer, which was floated on the stock exchange this year, contested the case, and appealed to the Supreme Court, which has now rejected its appeal.

The decision by the Supreme Court has been welcomed by the British Property Federation (BPF) which advocates a pay-as-you-go system for retail administration. They argue that this will not only benefit landlords, who will not be left out of pocket, but also insolvency practitioners, who will enjoy increased flexibility.

Ian Fletcher, Director of Policy at the British Property Federation, commented:

“This confirms that the decision made by the Court of Appeal in February was the correct one, and it is a relief to see that there is no more uncertainty surrounding the case. Had the appeal been allowed, the property industry would have been stuck in a state of flux with a longer wait for an answer to this critical question. As it is, common sense has prevailed and those administrators who had been holding back on paying rent due to landlords will now have to accept the inevitable.

“The decision has paved the way for a much fairer and sensible system and we would like to see the Insolvency Service take steps to ensure that this case is used as best practice for all future retail insolvencies, to ensure that landlords’ interests are safeguarded in the future.”

This case means that in future administrations rent must be paid on a ‘pay as you trade’ basis, irrespective of when the retailer filed for administration.

The ruling will now be seen as a test case which will have implications for the whole UK retail sector. It will make it much harder for retailers and their administrators to avoid paying rent while insolvent and give greater priority to landlords’ claims on rent due.

Please Note: This Article is 6 years old. This increases the likelihood that some or all of it's content is now outdated.
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